Ann: ADDRESS: NZX: Chairman & CEO Addresses to An

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					NZX
16/05/2014 14:04
ADDRESS

REL: 1404 HRS NZX Limited

ADDRESS: NZX: Chairman & CEO Addresses to Annual Meeting

Please see below text of the speeches delivered by NZX Chairman Andrew Harmos
and CEO Tim Bennett to NZX's Annual Meeting being held this afternoon in
Auckland.

Note that full videos of the speeches will be available from Monday on NZX's
corporate website NZXGroup.com.

For further information please contact:
Kate McLaughlin
Corporate Communications
M: 027 533 4529
T: 09 309 3654
E: [email protected]

Chairman's Address to NZX Annual Meeting 2014

I'd like to focus on two main themes in this address. The first is the
highlights of 2013, and the second is our goals and strategic direction for
2014 and beyond.

Clearly a lot of what 2013 will be remembered for is the strength of our
capital markets businesses:

- The most number of IPOs and capital raised in more than a decade.

- Capitalisation (that is, the aggregate dollar value) of listed equity on
our market up 24%, with strong growth in trading activity - volume and value
traded up by approximately 31% and 48% respectively.

- A significant increase in the number of retail investors with more than
100,000 new Common Shareholder Numbers issued.

These are critical outcomes in building scale and helping to underwrite the
long term viability of the New Zealand capital markets - a core role of which
is to facilitate access to capital for our growing businesses.

There is a saying, which you may have heard, that "success has many fathers"
and I don't want to give the impression that credit for those particular
achievements is ours alone to claim.  There are a large number of
contributors. Some are cyclical, but importantly, a number are structural -
such as the snowballing impact of KiwiSaver. We, along with New Zealand's
economy and the capital markets generally, expect to enjoy the benefits of
those structural factors, for many years to come.

One of the words that regularly comes up when describing NZX, is
"connecting". Connecting individuals and businesses to information and data,
connecting companies and investors, connecting buyers and sellers of
commodities and risk products. This isn't possible without first rate
infrastructure, and without confidence in rules, technology, systems,
processes and people leading to markets that are fair, orderly and
transparent. Connectivity facilitates and relies on third party activity. It
is not NZX that does the trading, or generates the core data that we
assemble, collate and distribute, it is not us that takes the underlying risk
which our risk management tools assist others to manage, and they're not our
companies that raise or trade equity, or issue debt. This is why I say our
success has many fathers.

I wouldn't like to leave you with the impression that our achievements in
2013 were only about the numbers. Our financial results were satisfactory,
reflecting an appropriate level of investment required to deliver on our
suite of opportunities. Importantly, we made great progress in strengthening
the organisation, the development of our people, continued emphasis on our
customers, and looking to position NZX well for the many opportunities that
lie ahead.

Growth Agenda

Management has a number of key priorities for growth in the current year, and
I will let Tim fill you on the details.  However, in a nutshell, the Board
and management are committed to deliver on the opportunities which have been
identified.

We are in a sweet spot in the capital markets. We are capitalising on the
positive changes that are occurring, and on delivering revenue and earnings
growth: not only in our capital markets business, but as much in our other
businesses.  As I said in my introductory remarks, while we are accountable
for delivery of these initiatives, they require extensive syndication and
support from our stakeholder community to establish, launch, and operate
successfully. Many require rule changes from regulators in New Zealand and in
some cases abroad, and the support of our own participant community, for
which we are grateful and don't take for granted.

So, on the capital market side you can expect to see:

- Continued focus on the listings pipeline and the stable embedded annuity
revenue that that creates.

- Launch of the growth market, both meeting existing demand, and creating
"supply driven demand" through having a more flexible listing alternative for
smaller, middle size and growth companies, and incubating Main Board
listings.

- Launch of equity derivatives which will provide investors with new hedging
tools and result in increased liquidity.

- The launch of new funds in our Exchange Traded Funds business, building on
the Smartshares brand, and offering additional passive low cost investment
options. The Exchange Traded Funds sector has grown explosively abroad, but
yet to in New Zealand. We see tremendous opportunity there, attracting
KiwiSaver and other investment fund flows.

Aaron Jenkins, our new Head of Markets, is tasked with leading the group
which has accountability for these deliverables.

At our April Investor Day, Aaron presented a set of slides which demonstrated
the extent of NZX's activity with a large number of prospective listing
candidates. It is a long and healthy list.

As the folks from Direct Capital point out in their recent newsletter - there
are more than 10,000 companies in New Zealand that employ 20 staff or more -
and approximately 1700 that employ 100 staff or more. Capital is a key
component in creating larger and more successful companies - it enables
growth and value creation - that injects employment and skills into an
economy. That 1700 which employ 100 or more people represent about 1.2% of
the total number of companies in New Zealand (145,000) but create about 30%
of revenues. We have around 160 listed companies from this 1700 - many of the
others are in co-operative, state or local authority ownership or are
subsidiaries of multinationals. Others are in private ownership. Private
equity provides options around this ownership structure when additional
capital or other goals, such as the need for succession so dictate - and so
do the public capital markets: the two can operate in tandem and the numbers
give some sense of the size of the opportunity for Aaron and his team.

As to some of the other elements of our growth agenda:

- On the soft commodities side, volume growth in dairy derivatives continues
to accelerate to the point where the NZX dairy derivatives market is the most
liquid market for risk management in milk powders globally.  We have outpaced
much bigger global exchanges. I mentioned offshore regulators earlier, and it
was a big deal for the derivatives team to win US Commodities Futures Trading
Commission accreditation earlier this year, and the extension in trading
hours to accommodate Northern Hemisphere traders has also been a contributor
to our volume growth. We are pursuing further growth initiatives in our soft
commodities business.

- Our Australian Clear Grain team has embraced the challenge for 2014 to
develop new products in markets to accelerate its growth to adjacent
geographies within Australia together with new product information offerings.

- Agri information is another priority growth area, and in addition to
continuing to grow current print publications, the key opportunity for this
team is shifting to an online model.  Tremendous progress was made on this in
2013 and again the team has embraced the challenges inherent in this space.
It has innovated cleverly with mobile device applications, new data displays
- but with any information business, the key remains leading edge quality
content.

Finally, all capital markets participants would like to see continuation of
the sound progress made in the national reform agenda: the
institutionalisation of a savings culture, partly through continued support
for the growth of KiwiSaver, a debate on the introduction of self-managed
accounts, financial literacy programmes in schools and universities, clarity
around share trading tax rules are all examples of areas worthy of informed
debate.

Organisational Focus

Organisationally, we will continue our emphasis on excellence in technology,
in the many facets of our market operations, finance, reporting and human
resources - all key areas of the organisation which embrace NZX's attitudes
of resilience, openness, creativity, integrity and delivery.

Our relationship with the FMA and the New Zealand Markets Disciplinary
Tribunal as co-regulators continues to grow as we look to minimise areas of
duplication, and maximise cooperation for the benefit of companies and market
participants that we regulate.

Our regulation team dealt very capably with the pressures associated with
increased IPO activity while monitoring issuer and participant compliance and
enforcement.  On the policy side, we have formed a dedicated regulatory
policy team so that we can be more proactive in our own regulatory response
to legislative and market changes, changes in behaviour and stakeholder
expectation.  The policy team has been heavily involved in rule formation for
the growth market, is undertaking a review project on the governance elements
of the listing rules, is working with participants and the FMA to minimise
duplication arising from participant compliance and to ensure that from our
side, the progressive coming into effect of the Financial Markets Conduct
Legislation is seamless.

Our diversity rules are contributing to positive outcomes - it was always
going to be the trend that would change more quickly than the underlying base
statistic, and if one takes the last 11 listings (2013 and so far in 2014)
the ratio of female directors is approximately 28%.  As we keep saying
however, diversity is about diversity of thought and skills, our agenda
having been focussed on the area where that has lagged the most.  We
acknowledge other important stakeholders and participants in that endeavour -
and again make the point that people need to look beyond just the listed
space, with our approximately 160 companies, for accountability on outcomes -
the opportunities go well beyond that.

Acknowledgments

As Chairman, I have again enjoyed tremendous support from my Board
colleagues, Tim and the senior management team. I would like to acknowledge
again their contributions, along with Pip Dunphy and Peter Lockery our
Clearing House Independent Directors.

A number of external stakeholders give unselfishly of their time to NZX - the
Listing Committee, comprising external experts who are enlisted to review
draft offer documents, members of the NZ Markets Disciplinary Tribunal to
whom complaints and enforcement action is referred - in particular its
chairman Derek Johnston who is retiring after many years of service, and the
Special Division of NZMDT, which regulates NZX as a listed entity. I would
like to acknowledge these individuals, and the entire NZX team. They all
carry a heavy workload and their contributions are much appreciated.

I would also like to take this opportunity to thank you, our shareholders,
for your support.

Andrew Harmos
Chairman
May 2014

NZX aims to continue to:

- Provide more opportunities for New Zealanders to invest in New Zealand
businesses.
- Offer a broad range of information data and risk management tools to
businesses to better enable and manage the price risk apparent in the
businesses.
- Work collaboratively with the industry to underwrite the long-term
viability of the New Zealand capital markets.
- Enhance and promote the quality of our market place for the benefit of
investors and other market participants.
- Make significant investments in our people, infrastructure and our
customers

CEO's Address to NZX Annual Meeting 2014

Good afternoon and thanks for taking the time to attend today.

Over the past ten years since demutualisation, NZX has had two phases of
strong growth. In the initial period after our 2003 listing, revenue growth
was driven by a combination of favorable capital markets activity and moving
to a more commercial pricing model. Over the past five years, revenues have
been driven by expansion of our non-capital markets business, primarily
though the acquisition of rural publisher Countrywide Publications Limited,
and several other the other agricultural information businesses, along with
Clear Grain, and M-Co, now NZX Energy.

We are now at the beginning of the next phase of growth; we have very good
growth opportunities across all of our businesses, and we have built a strong
foundation over the past year or so to capture these opportunities.

As Andrew mentioned, the growth in KiwiSaver is underpinning growth in
capital markets and will continue to do so, markets cycles aside, for many
years to come. In line with this, a particular focus for us this year is on
the listings pipeline for both the Main Board and our new growth market.

The new growth market will provide a fundamentally different environment for
capital raising for small, higher growth companies, and those New Zealanders
who would like to invest in them.  We have spent more than a year consulting
with the industry and have developed a new market structure that is unique:

- For issuers: lower costs for an initial offering and ongoing compliance
costs through the elimination of PFIs, simpler rules and a dedicated set of
advisors to support them.

- For investors: better information on which to make investment decisions
through regular, mandated updates from issuers, a focus on both financial
information and key operating metrics, research coverage and a disclosure
environment that will encourage more frequent updates and forward looking
statements.

- A market that will have more liquidity through the use of market-makers
which we expect to provide a more appropriate valuation mechanism for listed
companies.

The launch of the market is subject to both ministerial and FMA approval.
We're confident that we'll be ready to launch the market in the middle of the
year, dependent on these approvals.

Turning now to our soft commodity business which comprises dairy derivatives
and the Clear Grain Exchange in Australia. Volume growth in dairy futures has
been significant this year driven in part by the CFTC approval that we
received in January, which allows direct access to US participants to trade
on the market. We're continuing to work with Fonterra on further initiatives
to grow this market and continue to believe that futures volumes should grow
to a size (relative to traded physical volumes) that is comparable with other
commodity markets globally; implying 10 or 20 times the volumes that we
currently see in this market today. The Clear Grain team in Melbourne is
currently focused on launching forward contracts for the next harvest and
re-launching the Clear business in Western and South Australia.

As you will have noted from our quarterly update, we have seen strong growth
in revenues in our agri information publications in the first quarter when
compared to last year, when the drought severely impacted demand for
advertising. Of course, the greatest challenge in this business - like many
information publishers globally - is migrating from traditional print media
to online. The Agri HQ website re-launched at the beginning of 2013 and is
now generating around 100,000 unique visitors per month. We're continuing to
build a broad range of content on these sites, in addition to our high
quality news coverage. This includes an online learning tool Agri-Academy and
the Sharing Shed, an online forum. We launched a new data product for the
dairy sector Farmgate, in April and will launch a set of analytic tools for
dairy farmers in the middle of the year, based on work we have jointly
undertaken with Massey University.

In general, there is a lack of good quality information and data in the
agricultural sector, and NZX is well-positioned to provide this data and the
tools to analyse it. As we have noted before, we are continuing to seek small
acquisitions to broaden the range of commodities that we cover, in addition
to organically building the team, and hence our offering.

In our funds management business, we plan to launch two new funds this year.
Not only will they expand our offering, but they will increase the range of
passive funds available to investors in New Zealand; a segment that should be
a much larger part of the New Zealand market. As has been widely noted by
both academics and investment professionals, and as evidenced by the rapid
growth of Exchange Traded Funds in other markets, passive funds provide an
attractive option for long-term investors. Additional ETFs will also add
liquidity to the market and expand the volume of stock for lending through
the depository.

This is another example of where the launch of a product by NZX not only
benefits our business but also has beneficial second or third order impacts
on the market. This is also true for equity index futures, which we will
launch in June.

In addition to extending the range of fund management products we offer,
we've spent some time considering how we could participate in the growth of
the sector through the provision of registry or other products and services,
either directly or though Link Market Services, which we own 50% of.

Our Market Operations business, which comprises our operation of the Fonterra
Shareholders' Market and four service provider contracts for the Electricity
Authority, has had a good start to the year. While by their nature these
contracts have limited revenue upside, we do undertake development work on
behalf of the Electricity Authority. This year that includes two significant
projects to improve the efficiency of the electricity market; settlement and
prudential security, and the further development of financial transmission
rights. While these contracts will likely be re-tendered in 2016, we are
confident that we can demonstrate that NZX offers an effective and efficient
operational solution for the industry.

As I mentioned, we have built a solid foundation over the past twelve months
to capitalise on these opportunities. We upgraded our trading technology at
the end of 2012 and a number of elements of our non-core infrastructure last
year. The benefit of this has become apparent over the past year with the
sharp increase trading volumes, particularly during IPOs, large sell-downs
and index rebalancing, where our systems have performed flawlessly. We have
started planning work on the upgrade of our clearing system to the latest
version, which, if it meets our business case criteria, we will embark on
next year.

We have also made substantial changes in the past two years to the number and
structure of roles within the senior management team; more than half the team
are new or are in new roles. This has expanded our bandwidth to focus on the
areas I described above and more. I'd to take this opportunity thank the
management team for their valuable contribution, our Board for your guidance,
and to thanks you our shareholders for your ongoing support as we lay the
foundation for the next phase of growth at NZX.

Tim Bennett
CEO
May 2014

For further information please contact:
Kate McLaughlin
Corporate Communications
M: 027 533 4529
T: 09 309 3654
E: [email protected]
End CA:00250568 For:NZX    Type:ADDRESS    Time:2014-05-16 14:04:40